Indianapolis MARKETBEAT. Industrial Q Economy. Market Overview INDIANAPOLIS INDUSTRIAL. Economic Indicators

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Wilfrid Hines
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1 Economic Indicators MSA Employment MSA Unemployment U.S. Unemployment Market Indicators Overall Net Absorption/Overall Asking Rent 4-QTR TRAILING AVERAGE 2,500,000 2,000,000 1,500,000 1,000, ,000 INDIANAPOLIS INDUSTRIAL Overall Vacancy Q2 17 Q k k 3.3% 3.0% 4.3% 3.8% 12-Month Forecast Numbers above are quarterly averages; May 2018 data used to represent Q for Overall Vacancy Overall Absorption Under Construction Average Asking Rent* *Rental rates reflect net asking $psf/year ** Q2 17 Q % 5.2% 459K 2.0M 7.2M 7.6M $3.74 $ % 7% 6% 5% 4% 3% 2% 1% Net Absorption Historical Average = 6.1% Asking Rent, $ PSF 12-Month Forecast 0% $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 Economy The economy continues to provide fuel for local industrial real estate growth. The Circle City continues to operate near full employment while sustaining consistent wage growth. For 16 of the past 17 consecutive quarters, wage growth has remained above 2.5%. This is significant to the industrial sector because labor costs account for nearly 21% of revenue. One percentage point in labor cost inflation could negatively affect earnings by as much as 1.5%. Locally, Indiana s rising labor force participation rate (65.4%) and falling unemployment rate (3.0%) have forced companies to pay higher wages to attract talent. Indiana also continues to add jobs. Construction jobs grew 5.6% year-over-year (YOY) followed by Trade, Transportation, and Utilities jobs at 3.0% YOY and Manufacturing jobs at nearly 1.0% YOY. Production has not missed a beat either. The Institute for Supply Management (ISM) manufacturing purchasing managers index (PMI), a solid indicator for industrial space demand, topped out at 60.2 in June. The reading represented the strongest expansion in the manufacturing sector in four months and the highest reading since Current growth suggests the economy is shifting into a higher gear. Industrial Production Index (INDPRO) supports this view, providing another new historical high in April ( ) before falling slightly in May ( ). From a consumer standpoint, evaluation of present-day conditions were mostly unchanged. The Conference Board reported an increase to the Consumer Confidence Index in May to ahead of a minor dip in June to The slight reduction in optimism suggests less confidence in future economic conditions which can partly be attributed to current trade tensions with China. The recent announcement of $34 billion in levies on US soybeans, airplane, and motor vehicle exports comes after $34 billion in tariffs on Chinese auto parts, electronic components, jet engine parts, compressors and other machinery exports. For a sector that has been squeezed by trade tensions and rising labor costs, the market does not appear to be slowing, but rather keeping speed into future quarters. Market Overview The industrial market performed exceptionally well during the second quarter 2018, with positive 2.1 million square cushmanwakefield.com

2 feet (msf) directly absorbed. Among the industrial submarkets, the Southwest posted the largest net absorption total with positive 1.7 msf for the quarter. Other top-performing submarkets include the Northeast and the South. Among the major industrial product types, Modern Bulk facilities experienced positive 1.5 msf absorption followed by Medium Distribution facilities with positive 291,326 square feet (sf) and Manufacturing with positive 127,258 sf. THERE ARE CURRENTLY 24 PROJECTS TOTALING NEARLY 7.6 MSF UNDER CONSTRUCTION WITH JUST OVER 25% PRELEASED. Six newly constructed buildings were delivered during second quarter 2018 totaling 1,649,425 sf. The Southwest submarket experienced the most deliveries with three buildings totaling 1,192,042 sf. This total included Duke Realty s new 708,230-sf build-to-suit for Hewlett Packard at Smith Rd. The industrial market will continue to see elevated construction numbers throughout Currently, 24 projects totaling nearly 7.6 msf under construction with just over 25% preleased. Rental rates continue to rise rapidly, up 8.2% YOY. Even though demand kept step with supply for second quarter 2018, we expect that supply will edge out demand causing rental rate growth to slow slightly, but remain at a healthy pace for the remainder of Vacant Space by Product Type PERCENTAGE OF TOTAL VACANT SPACE Q % 6% 7% Office Showroom 3% 18% 16% Manufacturing Employment INDIANAPOLIS-CARMEL-ANDERSON MSA Medium Distribution Traditional Bulk Modern Bulk Manufacturing Flex Source: Cushman & Wakefield Research MSA Manufacturing Employment (Ths., SA) Source: U.S. Bureau of Labor Statistics Historical Net Absorption INDIANAPOLIS CONTINUES THE STREAK OF STRONG ABSORPTION Outlook The industrial market performed exceptionally well during the second quarter 2018 with positive 2.1 msf directly absorbed. We expect supply to edge out demand during the second half of the year. Six buildings were constructed during the second quarter 2018 totaling 1.6 msf leaving 24 projects totaling nearly 7.6 msf under construction and just over 25% preleased. Rental rates continue to rise rapidly, up 8.2% YOY. Expect rental rate growth to slow slightly, but still continue at a healthy pace Net Absorption (MSF) Source: The Conference Board cushmanwakefield.com I 2

3 SUBMARKET TOTAL BLDGS INVENTORY SUBLET VACANCY DIRECT VACANT DIRECT VACANCY RATE CURRENT DIRECT NET ABSORPTION YTD DIRECT NET ABSORPTION TOTAL OCCUPIED UNDER CONSTRUCTION OVERALL ASKING RENT* Downtown ,000,461 57,306 64, % 59,310 23,800 10,878,673 0 $4.74 East ,863, ,691 1,396, % 27, ,510 40,047, ,000 $3.69 Northeast ,773,020 27, , % 163, ,862 13,147,910 0 $7.71 North 159 6,932, , , % 8, ,121 6,518, ,656 $4.54 Northwest ,443, ,372 3,783, % 67, ,513 51,510,161 2,077,898 $4.10 Southeast ,802,517 5, , % -19,743-7,503 18,340,288 0 $4.27 South ,423, , % 108,105 92,807 14,560,863 2,354,102 $3.98 Southwest ,687, ,341 4,703, % 1,707,465 1,861,769 75,780,858 2,429,962 $3.73 West ,546, , % -7,200 82,000 15,214,478 0 $6.28 PROPERTY TYPE Office Showroom ,085,968 26, , % 71, ,052 13,198,920 30,000 $7.00 Medium Distribution ,435, ,055 2,169, % 291, ,851 52,804,540 1,899,812 $4.72 Traditional Bulk ,991, ,960 1,998, % 51, ,446 33,721,099 0 $3.52 Modern Bulk ,187, ,875 6,294, % 1,592,010 1,992,631 78,728,223 5,555,086 $3.49 Manufacturing ,093, , % 127, ,043 56,314,853 90,720 $3.90 Flex 240 8,350,864 68, , % -18,154-28,144 7,914,855 0 $7.68 Transport 79 3,327, , % 0 0 3,317,419 0 $5.60 2, ,472, ,248 12,478, % 2,114,643 2,951, ,994,157 7,575,618 $4.09 *Industrial asking rents converted to NNN Key Transactions Q (±250,000 SF) 1801 Innovation Blvd, Clayton 545,010 Geodis Logistics Direct Southwest 8677 Logo Athletic Ct, 536,804 adidas Renewal East 3522 Perry Blvd, Whitestown 440,314 Undisclosed Direct Northwest 5352 Performance Way, Whitestown 380,000 LaCrosse Footware Inc. Renewal Northwest 4255 S 500 E, Whitestown 369,499 Kuehne + Nagel d/b/a Rockwell Automation Direct Northwest 2155 Stafford Rd, Plainfield 357,000 Clorox Direct Southwest 317 S Enterprise Blvd, Lebanon 305,597 General Cable Industries, Inc Renewal Northwest 5425 Exploration Dr, 280,163 Integrated Distribution Services Direct Southwest Industrial Deliveries 2018 (±300,000 SF) Smith Rd/Allpoints Midwest, Plainfield 708,230 Build-to-Suit - HP/Ryder Logsitics Q2 18 Southwest 901 Edwards Dr, Lebanon 338,500 Build-to-Suit - Kens Foods Q2 18 Northwest 701 Columbia Rd/MetroAir Bldg 6, Plainfield 382,654 Speculative Q2 18 Southwest Upcoming Industrial Deliveries (±425,000 SF) 3124 Plainfield Rd/GreenPark III, Plainfield 702,000 Speculative Q3 18 Southwest 831 N Graham Rd, Greenwood 495,977 Speculative Q3 18 South Collins Rd/ Newgistics 446,500 Build-to-Suit Newgistics Q3 18 South 2856 S Ronald Reagan Parkway, Easton Cascade 430,000 Build-to-Suit - Bauer, Easton Cascade Q3 18 Southwest cushmanwakefield.com I 3

INDUSTRIAL SUBMARKETS INDIANAPOLIS Cushman & Wakefield One American Square, Suite 1800, IN 46282 USA cushmanwakefield.com Matt Niehoff Senior Research Analyst Direct +1 317 639 0460 matt.

4 INDUSTRIAL SUBMARKETS INDIANAPOLIS Cushman & Wakefield One American Square, Suite 1800, IN USA cushmanwakefield.com Matt Niehoff Senior Research Analyst Direct Mitch Ostrowski Research Analyst Direct About Cushman & Wakefield Cushman & Wakefield is a leading global real estate services firm that delivers exceptional value by putting ideas into action for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with 48,000 employees in approximately 400 offices and 70 countries. In 2017, the firm had revenue of $6.9 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services. To learn more, visit or on Twitter Cushman & Wakefield. All rights reserved. The information contained within this report is gathered from multiple sources believed to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.

Methodology Cushman & Wakefield s quarterly estimates are derived from a variety of data sources, including its own proprietary database and historical data from third party data sources.

5 Methodology Cushman & Wakefield s quarterly estimates are derived from a variety of data sources, including its own proprietary database and historical data from third party data sources. The market statistics are calculated from a base building inventory made up of industrial properties deemed to be competitive in the Central Indiana marketplace. Older buildings unfit for occupancy or ones that require substantial renovation before tenancy are not included in the competitive inventory. The inventory is subject to revisions due to resampling. Vacant space is defined as space that is available immediately or imminently after the end of the quarter. Sublet space still occupied by the tenant is not counted as available space. The figures provided for the current quarter are preliminary and all information contained in the report is subject to revisions based on additional data received. New Statistical Series To ensure the highest level of data integrity, Cushman & Wakefield periodically undertakes a comprehensive, quantitative and qualitative, review of all industrial inventory in the Central Indiana marketplace. During Q1 2017, Cushman & Wakefield Research conducted an extensive review of the industrial market and transitioned to a new data series. Explanation of Building Characteristics Office Showroom: Buildings designed to meet the needs of distributors or sales agents who do not require high ceilings or rail service. Tenants are typically under 25,000 sf, but sizes can vary. Common features include ceiling heights of ; few docks and/or drive-indoors; and office space of 20% to 25%. Medium Distribution: Buildings designed to meet the needs of intermediate-sized distributors. Tenants typically range from 12,000 sf to 75,000 sf. Common features include 14' 20' ceilings; docks and/or drive-in doors; office space of 10% to 20%; and, occasionally, rail service. Traditional Bulk: Buildings constructed prior to 1995 designed for large-scale distributors. Tenants typically are over 100,000 sf, with sizes varying. Common features include 20' 28' ceilings; multiple dock height doors with levelers and seals; office space of 1% to 5%; and, often, rail service. Modern Bulk: Buildings constructed since 1995 designed for large-scale distributors. Tenants typically are over 100,000 sf, with sizes varying. Common features include 28' clear ceiling heights or higher; multiple dock height doors with levelers and seals; office space of 1% to 5%; and, often, rail service. Flex: Buildings generally distinguished by office space ranging from 25% to 100%. Tenants typically are under 30,000 sf, but sizes can vary considerably. Common features include 12' 16' ceilings; high parking ratios; common dock areas; individual service doors; full window lines; and, landscaping. Manufacturing: Buildings designed for production, research, and development of goods. Tenant size varies from 5,000 SF to over 1 msf. Common features include 16' 24' ceilings; heavy power capacity; processed gas; floor drains; cranes; 1% to 10% office space; and, rail service. Transport: Buildings designed for vehicle upkeep, repair and storage. Tenants typically are 5,000 to 20,000 sf. Common features include 16' 24' ceilings. About Cushman & Wakefield Cushman & Wakefield is a leading global real estate services firm that delivers exceptional value by putting ideas into action for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with 48,000 employees in approximately 400 offices and 70 countries. In 2017, the firm had revenue of $6.9 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services. To learn more, visit or on Twitter Cushman & Wakefield. All rights reserved. The information contained within this report is gathered from multiple sources believed to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy. cushmanwakefield.com I 5

KC Office Report Second Quarter, 2018

KC Office Report Second Quarter, 2018 Overview Kansas City s Decreases to 6.8% Net Absorption Positive 173,436 SF in the Quarter The Kansas City Office market ended the second quarter 2018 with a vacancy